Ground Dairy draws up ambitious plan
By Zhang Jin and He Na (China Daily)
Updated: 2004-05-13 09:07

Ground Dairy Industry Corp, a latecomer to China's milk products market, will list its dairy business on the Singapore Stock Exchange late this year or early next year, the company says.

Analysts say the move is expected to help the Changchun-based company expand its sales grid across China, which will stir up the competitive Chinese dairy market.

"On the first day we elbowed our way into the dairy market, we made up our minds to pursue a listing," said Ren Song, the deputy general manager of the "rising-star" firm, as local media have dubbed it.

"We started to take concrete steps to push for this goal late last year, and we have made plenty of preparations," he said.

Details of the initial public offering are currently unavailable.

After cashing in on a bullish real estate market, the private company decided to plug into Jilin's dairy market three years ago. It made local players sit up and take notice by grabbing a dominant 20-per cent market share in Northeast China by the end of 2003.

The company's revenue from dairy businesses reached 1 billion yuan (US$121 million) in 2003.

Encouraged by its initial success, the ambitious firm is now setting up distribution offices throughout China.

These include Southwest China's Sichuan, and East China's Jiangsu, Zhejiang, Shandong and Shanghai.

"We are going to penetrate these markets with our new products such as milk tablets," said Ren.

The products, convenient to transport and store, will carry Ground's name nationally, he said.

The company will also renew its advertisement-oriented strategy, which has helped to squeeze its competitors in Northeast China.

"Branding is very important for a dairy firm to stand out in the Chinese market, as products made by different companies are basically of the same quality," he said.

Ren's growing confidence in making his company a big name in China is largely based on good supplies of high-quality milk, as Jilin, where the company's dairy farm is based, is one of the country's largest cow-raising spreads.

"We are going to keep 10,000 cows this year, and that will sustain the production of 60,000 tons of milk," Ren said.

And he believes China's growing dairy market also bodes well for Ground.

The market is to grow by 40 per cent in the next three to five years because of an increasing number of milk consumers, who are now used to including milk on their daily menus.

Market observers say the company's southern expansion will make the dairy market more competitive and mean more changes.

Traditional giants had already completed a market division in China in the past two or three years, but Ground was likely to trigger a redivision, they said.

However, analysts cautioned Ground's "go-south" campaign will be arduous, as the company is still a smaller player and the challenges ahead are much fiercer than those it has met on the northeastern market.

"The competition in the domestic dairy market is, after all, really cut-throat," said Ding Pin, an analyst at Haitong Securities.

To better meet future competition, the company is considering joining a partnership with other big names to explore more parts of China when the time is ripe, Ren said.

"Almost all of China's big dairy enterprises have talked with us about forming an alliance," he said.

"And even some international players are interested in us."

But co-operation has yet to come out, Ren said.

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